Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Oasis Petroleum Inc. (NYSE:OAS) from the perspective of those elite funds.
Oasis Petroleum Inc. (NYSE:OAS) has experienced a decrease in support from the world’s most elite money managers of late. Our calculations also showed that OAS isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We’re going to check out the latest hedge fund action encompassing Oasis Petroleum Inc. (NYSE:OAS).
How have hedgies been trading Oasis Petroleum Inc. (NYSE:OAS)?
At Q1’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards OAS over the last 15 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
The largest stake in Oasis Petroleum Inc. (NYSE:OAS) was held by Millennium Management, which reported holding $86.2 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $76.6 million position. Other investors bullish on the company included GMT Capital, AQR Capital Management, and Carlson Capital.
Due to the fact that Oasis Petroleum Inc. (NYSE:OAS) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of fund managers who sold off their full holdings heading into Q3. Interestingly, Anand Parekh’s Alyeska Investment Group sold off the largest investment of the 700 funds watched by Insider Monkey, totaling about $19.3 million in stock, and Daniel Arbess’s Perella Weinberg Partners was right behind this move, as the fund sold off about $18.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Oasis Petroleum Inc. (NYSE:OAS) but similarly valued. These stocks are BBVA Banco Frances S.A. (NYSE:BFR), World Fuel Services Corporation (NYSE:INT), GTT Communications Inc (NYSE:GTT), and Artisan Partners Asset Management Inc (NYSE:APAM). This group of stocks’ market valuations are closest to OAS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BFR | 15 | 29497 | 2 |
| INT | 18 | 118572 | -6 |
| GTT | 18 | 547225 | 3 |
| APAM | 16 | 168247 | 0 |
| Average | 16.75 | 215885 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $277 million in OAS’s case. World Fuel Services Corporation (NYSE:INT) is the most popular stock in this table. On the other hand BBVA Banco Frances S.A. (NYSE:BFR) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Oasis Petroleum Inc. (NYSE:OAS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately OAS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OAS were disappointed as the stock returned -14.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
